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Plastec Technologies, Ltd. - (OTCBB: PLTYF (ordinary shares), PLTWF (warrants), PLTEF (units)) (“Plastec” or the “Company”), an integrated plastic manufacturing services provider that operates in the People’s Republic of China and Thailand, today reported audited financial results for the fiscal 2013 year ended December 31, 2013. See attached tables at the end of this release in Hong Kong dollars (HKD). All other amounts in this press release are presented in U.S. dollars (USD) with a conversion rate of US$1.0: HK$7.8.

FY 2013 Financial and Operating Highlights

(all comparisons to prior year)

• Sales of $149.6 million, a decrease of 11.2% as a result of a reduction in lower margin product orders from existing customers
• Gross margin of 22.9%, compared to 12.9%, resulting primarily from a more favorable product mix
• Adjusted EBITDA of $28.8 million, compared to $29.5 million
• Net income of $10.4 million, or $0.77 per diluted share based on 13.5 million diluted shares outstanding, compared to $9.0 million, or $0.63 per diluted share based on 14.4 million diluted shares outstanding
• $20.3 million in cash from operations for the year ended December 31, 2013

Balance Sheet Highlights (at December 31, 2013)

• $58.0 million in working capital at December 31, 2013, compared to $39.9 million at December 31, 2012
• Company repurchased 1,354,100 shares and 85,000 warrants during the twelve months ended December 31, 2013
• Book value per share of $7.96 at December 31, 2013

Management Comments

Mr. Kin Sun Sze-To, Chairman of Plastec, stated, “Throughout 2013, we were focused primarily on expanding our margins in light of a challenging macro environment in the consumer products sector. We are pleased to have improved our gross margins by avoiding the acceptance of projects for the sole purpose of increasing the top line. Plastec’s specialty is on precision molding design and finishing services, primarily concentrated in the new models of our clients’ product lines. Plastec’s primary value-proposition has been an expertise in this specific niche, and we are pleased to leverage our reputation in this regard to achieve incremental margin enhancement from our clients.”

Mr. Sze-To continued, “We have continued to invest heavily in our company, both in terms of upgrading our assets and selectively repurchasing our securities. In addition, we declared a dividend as a measure of rewarding our shareholders for their continued support of Plastec. Our goal is to continue to generate free cash flow and then use that capital to position Plastec to grow at times when the economic cycle is favorable. We feel that we have the infrastructure in place to handle additional demand from our current clientele, many of whom have now worked with our Company for years. We believe that as we continue to improve production facilities, expand our capacity, explore international opportunities and further strengthen our precision molding abilities, we will be able to retain and attract new multinational customers. We feel there are numerous avenues for potential growth, including expansion into new industries, either organically or through complementary acquisitions.”

Selected Financial Highlights

(USD in millions, except number of shares and per share data)

(Results and percentages rounded to the nearest tenth)

         

12 months

endedDecember 31,

2013

   

12 months

endedDecember 31,

2012

 

Percentage

Change

Sales $ 149.6 $ 168.4 -11.2 % Cost of Revenues $ 115.4 $ 146.8 -21.4 % Gross Profit $ 34.2 $ 21.6 58.6 % Gross Profit Ratio 22.9 % 12.9 %   Income from Operations $ 11.0 $ 10.1 8.0 % Operating Margin 7.3 % 6.0 %   Net Income $ 10.4 $ 9.0 15.2 % Net Margin 6.9 % 5.3 %  

Weighted Average

Number of Diluted

Shares Outstanding

13,503,623 14,446,515 Diluted EPS $ 0.77 $ 0.63 22.2 % Adjusted EBITDA* $ 28.8 $ 29.5 -2.6 %

* Reconciliation table at end of release

Balance Sheet Highlights (USD in Millions)  

12/31/2013

   

12/31/2012

   

Percentage Change

Cash and Cash Equivalents $ 44.7 $ 39.7 12.6 % Total Current Assets $ 96.6 $ 89.8 7.6 % Total Assets $ 148.1 $ 151.2 -2.1 % Working Capital $ 58.0 $ 39.9 45.5 % Total Long-term Debt 6.4 0 Total Liabilities $ 45.0 $ 51.4 -12.4 % Shareholders’ Equity $ 103.0 $ 99.8 3.3 % Total Liabilities and Shareholders' Equity $ 148.1 $ 151.2 -2.1 %

2013 Financial Review

• Total sales for the year ended December 31, 2013 decreased to $149.6 million from $168.4 million in the prior-year. The decline in total sales was largely due to a reduction in lower margin product orders.
• The Company’s gross profit increased by 58.6% to $34.2 million during the year ended December 31, 2013, and gross profit margin improved to 22.8% from 12.9% for the prior year. The increase in gross profit and margin was due to a number of factors including a focus on new models from existing customers, which typically carry a much higher margin than second generation orders, and a reduction in costs of revenues resulting from the Company’s efforts to further streamline its manufacturing process.
• Income from operations was $11.0 million, or 7.3% of revenues, during the year ended December 31, 2013, compared to $10.1 million, or 6.0%, in the prior-year period.
• Adjusted EBITDA for the year ended December 31, 2013 was $28.8 million, compared to $29.5 million in the prior year.
• Net income for the year ended December 31, 2013 was $10.4, or $0.77 per share based on approximately 13.5 million weighted average diluted shares outstanding, compared to $9.0 million, or $0.63 per share based on approximately 14.4 million weighted average diluted shares, in the prior-year.

Share and Warrant Repurchase Update

In September 2013, the Company announced the completion of its previously announced repurchase plan of up to $5 million of its ordinary shares and warrants, which was scheduled to expire on December 9, 2013. At the completion of the plan, Plastec had repurchased 832,765 shares and 85,000 warrants thereunder. The Company subsequently announced a new 12-month repurchase plan through September 25, 2014, allowing Plastec to purchase up to $5 million of its ordinary shares and warrants in both open market and privately negotiated transactions at the discretion of the Company’s management and as market conditions allow. As of the date of this press release, Plastec had repurchased 586,010 shares and no warrants under the current plan.

About Plastec

Originally founded in 1993 by Chairman and CEO, Mr. Kin Sun Sze-To, Plastec is an integrated plastic manufacturing services provider that operates in the People’s Republic of China and Thailand through its wholly owned subsidiaries. With over 4,700 employees, Plastec provides precision plastic manufacturing services from mold design and fabrication, plastic injection manufacturing to secondary-process finishing, as well as parts assembly.

Forward Looking Statements

This press release contains “forward-looking statements.” These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Actual results may differ from expectations, estimates and projections and, consequently, you should not rely on these forward looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements.

PLASTEC TECHNOLOGIES, LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Hong Kong dollars in thousands, except number of shares, per share data and unless otherwise stated)

 

Year ended April 30,

 

8-month

Period ended

December 31,

 

Year ended

December 31,

2011     2012     2012     2013   HK$   HK$ HK$ HK$     Revenues 1,323,533 1,291,223 933,888 1,167,115 Cost of revenues (1,074,880 )   (1,142,653 )   (807,104 )   (899,400 ) Gross profit 248,653 148,570 126,784 267,715   Operating expenses, net Selling, general and administrative expenses (83,584 ) (81,557 ) (66,330 ) (166,969 ) Other income 4,711 2,431 6,266 2,508 Write-off of property, plant and equipment (1,791 ) (690 ) (4,058 ) (14,920 ) Gain / (Loss) on disposal of property, plant and equipment

1,315

   

938

   

1,898

   

(2,836

)

Total operating expenses, net (79,349 ) (78,878 )   (62,224 )   (182,217 )   Income from operations 169,304 69,692 64,560 85,498   Interest income 124 218 166 276 Interest expense (3,008 )   (2,695 )   (1,559 )   (1,160 ) Income before income tax expense 166,420 67,215 63,167 84,614   Income tax expense (33,106 )   (16,811 )   (3,344 )   (3,734 ) Net income 133,314 50,404 59,823 80,880   Other comprehensive income Foreign currency translation adjustment 218     7,408     (990 )   3,377   Comprehensive income attributable to

Plastec Technologies, Ltd.

133,532

   

57,812

   

58,833

   

84,257

    Net income per share:   Weighted average number of ordinary shares 7,891,754     15,944,233     14,303,544     13,503,623     Weighted average number of diluted

ordinary shares

7,891,754

   

15,944,233

   

14,303,544

   

13,503,623

    Basic income per share

attributable to Plastec Technologies, Ltd.

HK$16.9

 

HK$3.2

 

HK$4.2

 

HK$6.0

  Diluted income per share

attributable to Plastec Technologies, Ltd.

HK$16.9

 

HK$3.2

 

HK$4.2

 

HK$6.0

PLASTEC TECHNOLOGIES, LTD.

CONSOLIDATED BALANCE SHEETS

(Hong Kong dollars in thousands, except number of shares, per share data and unless otherwise stated)

    April 30, December 31, December 31, 2012   2012   2013 HK$ HK$ HK$  

ASSETS

Current assets Cash and cash equivalents 199,818 309,862 348,901

Trade receivables, net of allowances for doubtful accounts of

HK$nil, HK$nil and HK$nil as of April 30, 2012

and December 31, 2012 and 2013 respectively

282,869

257,299

269,419

Inventories 128,387 97,467 107,058 Deposits, prepayment and other receivables 20,514   35,471   28,139 Total current assets 631,588 700,099 753,517   Property, plant and equipment, net 524,137 440,383 364,149 Prepaid lease payments, net 24,753 23,719 22,167 Other assets 12,813 14,503 2,325 Deferred tax assets - - 12,225 Intangible assets 438   438   438 Total assets 1,193,729   1,179,142   1,154,821  

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities Bank borrowings 156,866 96,892 37,782 Capital lease obligations 303 - - Trade payables 121,964 151,436 105,428 Other payables and accruals 115,109 115,715 116,608 Tax payable 72,936   25,225   41,389 Total current liabilities 467,178 389,268 301,207   Borrowings - - 50,000 Deferred tax liabilities 14,504   11,629   - Total liabilities 481,682   400,897   351,207   Commitments and contingencies - - -   Shareholders’ equity

Ordinary shares (US$0.001 par value; 100,000,000

authorized, 14,352,903, 14,292,228 and 12,938,128 shares

issued and outstanding as of April 30, 2012 and December

31, 2012 and 2013, respectively)

 

112

 

112

 

101

Additional paid-in capital 77,967 85,332 26,455 Accumulated other comprehensive income 15,514 14,524 17,901 Retained earnings 618,454   678,277   759,157 Total shareholders’ equity 712,047   778,245   803,614           Total liabilities and shareholders’ equity 1,193,729   1,179,142   1,154,821

PLASTEC TECHNOLOGIES, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Hong Kong dollars in thousands, except number of shares, per share data and unless otherwise stated)

   

Year ended April 30,

 

 

8-month

Period ended

December 31,

   

Year ended

December 31,

2011       2012       2012       2013   HK$     HK$ HK$ HK$ Operating activities Net income 133,314 50,404 59,823 80,880

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization 143,640 157,219 103,513 123,741 Net gain on disposal of property, plant and equipment (1,315 ) (938 ) (1,897 ) 2,836 Net gain on disposal of prepaid leases (3,799 ) - - - Write-off of property, plant and equipment 1,791 690 4,058 14,920 Impairment on inventories 6,095 6,920 4,108 7,037 Deferred tax charge - (652 ) (2,732 ) (23,854 ) Changes in operating assets and liabilities: Trade receivables (28,666 ) (12,106 ) 25,553 (12,120 ) Inventories (49,530 ) (17,574 ) 26,812 (16,628 ) Deposits, prepayment and other receivables 3,382 (12,158 ) (13,772 ) 7,332 Trade payables (8,027 ) (6,023 ) 29,472 (46,008 ) Other payables and accruals 27,044 34,299 12,212 891 Tax payables 37,711       16,547       416       19,276   Net cash provided by operating activities 261,640       216,628       247,566       158,303     Investing activities Purchase of property, plant and equipment (225,904 ) (126,167 ) (87,224 ) (54,436 ) Proceeds from disposal of property, plant and equipment 2,405 5,252 29,665 6,634 Proceeds from disposal of prepaid leases 3,919 - - - Deposits for purchase of property, plant and equipment (8,001 ) (12,813 ) (15,690 ) (2,325 ) Net loss on disposals of subsidiaries -       -       (165 )     -   Net cash used in investing activities (227,581 )     (133,728 )     (73,414 )     (50,127 )   Financing activities Net cash inflow from the merger transaction 58,160 - - - Repurchases of shares - (92,025 ) (2,841 ) (63,404 ) Proceeds from bank borrowings 464,651 379,465 220,809 195,214 Repayment of bank borrowings (408,917 ) (392,309 ) (280,783 ) (204,324 ) Repayment of capital lease obligations (9,718 ) (5,311 ) (303 ) - Dividends paid (70,000 )     -       -       -   Net cash provided by (used in) financing activities 34,176       (110,180 )     (63,118 )     (72,514 )   Effect of exchange rate changes on cash and cash equivalents 218 7,341 (990 ) 3,377   Net increase (decrease) in cash and cash equivalents 68,235 (27,280 ) 111,034 35,662 Cash and cash equivalents, beginning of year 151,304       219,757       199,818       309,862   Cash and cash equivalents, end of year 219,757       199,818       309,862       348,901     Supplementary disclosures of cash flow information: Interest paid, net 2,883       2,477       1,393       886     Income taxes paid (4,605 )     916       5,660       8,312  

PLASTEC TECHNOLOGIES, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Hong Kong dollars in thousands, except number of shares, per share data and unless otherwise stated)

        8-month

Period ended December 31,

Year ended December 31,

2011     2012         2012     2013   HK$   HK$ HK$   HK$ (Unaudited) (Audited) (Unaudited) (Audited)     Revenues 911,294 933,888 1,313,818 1,167,115 Cost of revenues (801,413 )   (807,104 )       (1,144,971 )   (899,400 ) Gross profit 109,881 126,784 168,847 267,715   Operating expenses, net Selling, general and administrative expenses (56,498 ) (66,330 ) (94,743 ) (166,969 ) Other income 1,600 6,266 7,098 2,508 Write-off of property, plant and equipment (690 ) (4,058 ) (4,058 ) (14,920 ) Gain/(loss) on disposal of property, plant and equipment 829     1,898         2,007     (2,836 ) Total operating expenses, net (54,759 )   (62,224 )       (89,696 )   (182,217 )   Income from operations 55,122 64,560 79,151 85,498   Interest income 172 166 212 276 Interest expense (1,880 )   (1,559 )       (2,374 )   (1,160 ) Income before income tax expense 53,414 63,167 76,989 84,614   Income tax expense (13,379 )   (3,344 )       (6,777 )   (3,734 ) Net income 40,035 59,823 70,212 80,880   Other comprehensive income Foreign currency translation adjustment 7,157     (990 )       (911 )   3,377   Comprehensive income attributable to

Plastec Technologies, Ltd.

47,192

   

58,833

       

69,301

   

84,257

    Net income per share   Weighted average number of ordinary shares 16,540,951     14,303,544         14,446,515     13,503,623     Weighted average number of diluted

ordinary shares

16,540,951

   

14,303,544

       

14,446,515

   

13,503,623

    Basic income per share

attributable to Plastec Technologies, Ltd.

HK$2.4

 

HK$4.2

     

HK$4.9

 

HK$6.0

  Diluted income per share

attributable to Plastec Technologies, Ltd.

HK$2.4

 

HK$4.2

     

HK$4.9

 

HK$6.0

PLASTEC TECHNOLOGIES, LTD.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Unaudited)

(Hong Kong dollars in thousands)

    12 Months Ended December 31   December 31 2012     2013   HKD   HKD Net Income (note) 65,165 96,128   Plus Interest expenses 2,374 1,160 Minus Interest incomes (212 ) (276 ) Plus Income tax expenses 6,777 3,734     Income from operations 74,104 100,746   Plus Depreciation and Amortization 156,337 123,741       Adjusted EBITDA 230,441     224,487     Note: Excl. other incomes and gain/(loss) on disposals/written-off

This press release includes financial information (EBITDA) not derived in accordance with generally accepted accounting principles or international financial reporting standards. Plastec believes that the presentation of such financial information provides more useful information to investors as it indicates more clearly Plastec’s future performance. EBITDA was derived by taking earnings before interest expense (net), taxes, depreciation and amortization

Plastec Technologies, Ltd.HL Ning, Chief Financial Officerning@plastec.com.hkorEli D. Scher, Directoreli@plastec.com.hkorINVESTOR RELATIONS:The Equity Group Inc.Adam Prior, 212-836-9606Senior Vice Presidentaprior@equityny.comorIn ChinaKatherine Yao, 86 10 6587 6435Associatekyao@equityny.com